Are you a small employer in the rehab facility industry? If so, you may have heard about ERC – or Employee Retention Credit.
This government program was created to help businesses facing economic hardship due to the pandemic. It offers financial relief and tax breaks for employers of all sizes, including small employers like yourself.
In this article, we’ll discuss what ERC is, who it applies to, and key considerations before applying for this credit.
Read on to learn more.
Organization Shutdown
If your facility was shut down in any way (including reduced capacity and hour restrictions) due to government orders, you probably will be eligible for the Employee Retention Credit. The ERC is a credit available to businesses that have experienced a full or partial suspension of operations resulting from government orders, and if the impact of such a shutdown on the business was more than nominal.
Rehab facilities are one of the most heavily regulated industries in the country and complying with regulations, state health officials, and local health officials related to COVID-19 could potentially qualify an organization for this credit.
To determine eligibility, organizations must meet a high documentation threshold which could disqualify many facilities based on gross receipts alone. However, it’s worth considering this alternative criteria as it may provide relief in difficult times. Another consideration is the impact of supply chain issues to your facility. Did you have a tough time getting masks and PPE equipment?
Understanding these rules and determining whether they apply to your facility can help you decide if the ERC is right for you.
Definition of Small Employer
You may think that counting full-time equivalents would put your organization well over the employee count, but there are important distinctions to be made. First and foremost, it’s only actual full-time employees (working more than 30 hours a week) that should be included in the calculation – so any part-timers should not be taken into account when determining eligibility for ERC benefits (although part time employees can add to the credit received).
Second, if you’re part of a larger ownership group with multiple facilities, each facility could still qualify as a smaller employer “group” for purposes of the ERC. This means that even if one property has too many employees to qualify on its own, it can still benefit from the credits alongside other properties within the same group.
It pays to do some research on how your organization is structured – it could mean the difference between missing out on potential savings or taking advantage of higher ERC benefits! Knowing which rules and regulations apply to you is essential for making sure you get all available credits due to you. Don’t miss out on financial help that could make a huge difference in these uncertain times.
Make sure you completely understand all of the criteria required for being classified as a small employer and if necessary, seek professional advice so you can maximize your potential benefits under this scheme! It’s worth familiarizing yourself with how everything works so you don’t miss out on any possible advantages.
Key Considerations
Making sure you understand all the criteria necessary for being classified as a small employer and taking advantage of more ERC benefits could make a huge difference during these difficult times. The IRS has provided extensive guidance to help those claiming the credit understand what is required and avoid potential audit risks.
Operators must be able to prove that they experienced a decline in gross receipts or were subject to a full or partial suspension of operations. When reviewing any government orders relating to suspensions, employers should have both the exact government order (as defined by Notice 2021-20) and the associated timeline documented.
Organizations need to be able to show “more than nominal” impact of the government order on their business operations, which is defined as at least 10%. Quantitative data must be used when attempting to establish “more than nominal” impact, but it needs to link back directly with the government order in question.
This means organizations should document both qualitative and quantitative information that will support their claim if needed during an audit. It’s also important for operators who are part of an aggregated group look closely at how aggregation affects eligibility for ERC credits, computation methods for average number of full-time employees in 2019, and allocation of credit among related entities.
Furthermore, operators must take into account that while they have three years from filing date (or two years from payment date if later) to amend returns and claim ERC refunds – there is still limited guidance on how employers can prove 10% “more than nominal” impacts on their operations due to government orders – so having well-documented fact patterns are key!
It’s also worth noting that the IRS has five years after filing/payment dates to audit (and even disallow) ERCs so it’s critical that operators keep all relevant documentation safe for future reference.
It takes time for processing amended 941X forms and issuing refunds – so planning ahead is essential! Employers must ensure they meet all applicable requirements before submitting amended returns; otherwise, they may face interest charges on top of repayment amounts along with penalties if refunded amounts are not eligible under law.
Conclusion
You’ve made the right decision for your rehab facility by considering an ERC. The key considerations you must understand before deciding are what constitutes a small employer, and how it will affect your organization if it shuts down.
Now that you have all the information, you can make a well-informed choice. With this knowledge in hand, you can confidently select the best plan for your business and move forward with confidence knowing that you’ve chosen wisely.
Your employees will thank you for taking such decisive action to ensure their long-term financial stability.